Current Account mortgage

peter200

I am on the point of taking out a current account mortgage with Yorkshire Bank for £183000 over 15 years. The main attraction is that offer the prospect of paying off the mortgage six years early ( more quickly than any offset models that I have seen). I only have relatively limited savings (£4500) but a fairly high salary going into my current account each month (about £3600). Yorkshire Bank offer the lowest interest rate for CAM products that I can find (5.29%).
Any views on whether this seems a reasonable way forward. Are there any cheaper CAM deals out there? Any comments or advice warmly welcomed

Joe_Bloggs

@Peter200
If you can only save £4500 on a £3600 income then I can't see how an offset product can help much with a £183,000 mortgage. Better to go for the best rate you can get. I'm sure you can get a 4.95% offset tracker with the YBS. You won't feel the benefit until you have significant savings as a proportion of the mortgage.
Would you save more money in offset mortgage accounts if you had such accounts and could experience the benefits ?
J_B. (Spend your money your way !)

MortgageMamma

intelligent finance have a one year fixed offset dealwith a current account, ISA and savings account linked, which I think is good, but I wouldnt recommend you take it unless I had assessed your circumstances in full.

herbiesjp

I do think you should have a word with a whole of market mortgage adviser being going into the current account mortgage scenario.

Whilst there may be some better current account mortgages out there, you may indeed find that you could be better off paying into a conventional mortgage, as it will mean access to lower rates

peter200

Thanks for the comments- feedback and advice is much appreciated. I was attracted to a current account mortgage by the calculator on the Oneaccount website which suggests that current account mnortgages enable you to pay off the mortgage much more quickly than conventional mortgages. Do I take it that this model has some serious flaws?

MortgageMamma

Not flaws exactly but a lot of whether it is beneficial depends on the amount of money flowing through the account in proportion to the size of your mortgage and the interest rate, plus any charges. The same principal works with offsets. the calculations to work out if its beneficial or not can get complicated for the untrained eye but a decent advisor could help you overcome this, assess your suitability for the product and vice versa, compare this to other options to decrease the mortgage term and arrange the whole thing for you.

herbiesjp

Other mortgages are flexible, and allow you to overpay, and then draw back any overpayments that you make should you need the money - and these will have the same effect as offseting. The benefit here is that you will normally benefit from lower rates when compared to current account mortgages

As MM rightly says, offset/current account mortgages have had the big sell, however you need to have the right circumstances to make them work for you.

tawnyowls

If you do decide to go for a current account mortgage (rather than an offset, because they are different although similar), NatWest do an almost identical product at a lower rate, depending on the loan-to-value ratio. The only other 2 real current account mortgages I know of are the One account and Clydesdale Bank.

I agree CAMs are not necessarily the best rate, but if you're self-employed you're going to have money sitting in their for quite a while before Gordon Brown gets his paws on it, plus there's no chance of you runnning up overdraft charges by not having money in the right account at the right time, so you might find that this is the best type of mortgage for you even if you are paying a higher rate.